Ukraine-Part 4: Who Duped Whom!

In the Ukraine series we first (in part 1) tried to see how the propaganda mind control techniques worked on its citizens for 25 years to achieve the agenda of the conspirators. That ended with the putsch which overthrew the legitimate government. Also that was the start of the whole Ukraine saga which is shaping the current geopolitical landscape in the world. People of Ukraine were euphoric, and dreaming. In second part we saw the whole picture, all parties involved in it, analyze bit more clearly their agenda, and how they tried to gain (or eventually lost) the upper hand. As time goes by in part 3 we saw the beginning of the realizations of the parties involved of their blunder! First from the EU on their mistakes done since the beginning. But so far, the people of Ukraine were not in consideration by any parties. Now in part 4 we can see the realization of the people of Ukraine. Its like the morning after the party, when suddenly things are clear as the delusions are over. This is a classic case of deception and plunder of a country by the west in the twenty first century!
Lets see what the people of Ukraine are now saying. Remember these you will never see in wmsms! So, please be cautious on your interpretations. Russian news channel Sputink news reports citing Yuri Kosyuk, a Ukrainian agriculture businessman, that the coveted EU association agreement gives Ukraine nothing , while all trade benefit goes to the EU (finally!):

Europe talks of the Free Trade Area with Ukraine, and at the same time a load of exceptions and limitations are put on the export of Ukrainian goods. Because of this, the free trade area is only one-way, into Ukraine

The EU association agreement imposes quotas on Ukrainian imports of poultry of only 16,000 tons per year, or 1.3% of total Ukrainian production. Kosyuk continued:

There will be no economic growth, it is a lie. I think that the economy will decline this year. We see the attitudes in business, why would there be growth? There are several economic drivers. The internal consumer, when consuming, can move the economy upwards. But the internal consumer is becoming poorer and has less and less money. The second driver is external markets, but they have remained the way they have been. The third driver is foreign investment. But foreign investment will not come to Ukraine in the short term.

A Brookings Institute article: ‘Ukraine: A Prize Neither Russia Nor the West Can Afford to Win’ appeared two years ago by two American academics, Clifford G. Gaddy and Barry W. Ickes. Below is what they said on what will happen eventually, and what is happening now:
……………………………………………….It is clear to most observers that the West would not be able to defend Ukraine economically from a hostile Russia. Russia is in a position to do far more damage than the West can defend against or repair. It’s always true that it’s easier to undermine a country economically than to build it up. It’s easier to destabilize than stabilize. It is perhaps less evident that the West would have a very hard time stabilizing the Ukrainian economy even if Russia weren’t around to make mischief. The simple fact is that Russia today supports the Ukrainian economy to the tune of at least $5 billion, perhaps as much as $10 billion, each year.

When we talk about subsidies, we usually think of Russia’s ability to offer Ukraine cheap gas — which it does when it wants to. But there are many more ways Russia supports Ukraine, only they are hidden. The main support comes in form of Russian orders to Ukrainian heavy manufacturing enterprises (based in Kharkov, Nikolayev, Dnepropetrovsk, Odessa) This part of Ukrainian industry depends almost entirely on demand from Russia. They wouldn’t be able to sell to anyone else.

The southern and eastern provinces of Ukraine are dominated by Soviet-era dinosaur enterprises similar to Russia’s. They were all built in Soviet times as part of a single, integrated energy-abundant economy. They could be sustained only thanks to the rents from Soviet (overwhelmingly Russian) oil and gas. Russian subsidies have continued to maintain the structure in the post-Soviet era. Because most of these subsidies are informal, they do not appear in official statistics. (In fact, not even Putin talks about them, though it might be to his advantage to do so, because acknowledging the existence of hidden Russian subsidies to value-destroying Ukrainian enterprises would expose the fact that the same thing goes on, on a much greater scale, with their Russian counterparts. They, too, are not producing real value.)

The subsidies are hidden, but there are ways to tease out the underlying reality of how Russia’s resource rent is being shared with Ukraine. A good example is Ukraine’s railroad equipment manufacturing sector. The Ukrainian railroad locomotive and rolling stock producers have been an integral part of the Soviet/Russian rent-distribution chain since the Soviet era. They were built and sustained with Russian oil and gas rents. Virtually all of their export shipments go to Russia. (Again, remember that nobody else wants what they produce.)

Russian domestic demand for railway cars in turn depends on the flow of oil and gas rents to Russia … That rent flow is driven by the world price, which Russia obviously cannot determine. Hence, the fact that Ukrainian production looks exactly like Russian production … demonstrates how tied together this sector is between the two countries. It is one integrated sector in the Russian rent distribution system. This part of Ukrainian heavy industry was being treated by the Russians on an equal basis with their own manufacturing sector. That is, it was up until the second quarter of 2013. At that point, the Russians stopped ordering Ukrainian rail cars and locomotives. They cut off the Ukrainian sector from the rents. The rents had not declined, and part of the rent kept going to the Russian producers. But orders to Ukraine collapsed.

A couple of more points are worth noting. First, this drop in Russian orders is costing Ukraine a great deal of money, more than three billion dollars in annual revenue. The plants are now effectively shut down. There are also knock-on effects to the metals producers, mining and power sectors. At the same time, the rolling stock producers are only part of the huge Ukrainian dinosaur manufacturing sector that is supported by Russian orders. Defense industries account for a bigger share. Ukraine’s portion of the Soviet defense industrial complex was about one-fourth the size of the Russia’s. But it was much more highly concentrated geographically. Approximately 96 percent of Ukraine’s defense industry employment was in four cities: Kiev, Kharkov, Dnepropetrovsk and Nikolayev. One out of every four people in the labor force in those cities worked in defense plants. That’s why some recent statements by Putin about plans to eliminate imports of defense goods sounded ominous in certain parts of Ukraine. At a meeting with his own defense industry executives on May 14, Putin said: “[Because of Western sanctions] we have new circumstances to address now — we need to replace imports. … [W]e need to do everything we can to have everything that our defense industry needs produced here on our own soil, so that we will not be dependent on anyone else for any of the new weapons systems we are delivering to our armed forces.”

If the West were somehow able to wrest full control of Ukraine from Russia, could the United States, the other NATO nations, and the EU replace Russia’s role in eastern Ukraine? The IMF, of course, would never countenance supporting these dinosaurs the way the Russians have. So the support would have to come in the way of cash transfers to compensate for lost jobs. How much are we talking about? The only known parallel for the amount of transfer needed is the case of German reunification. The transfer amounted to 2 trillion euros, or $2.76 trillion, over 20 years. If Ukraine has per capita income equal to one-tenth of Germany’s, then a minimum estimate is $276 billion to buy off the east. (In fact, since the population size of eastern Ukraine is larger than East Germany’s, this is an underestimate.) It is unthinkable that the West would pay this amount.

Notice that Russia, by contrast, could survive the cutoff of Ukrainian industry. The Soviet Union provided for dual sources for virtually every component needed for its defense industry. For every producer located in Ukraine, there was an actual or potential twin far off to the east in the Urals and beyond. Russia could just implement more import substitution (as Putin announced in the quote above). This is economically inefficient, but it is what every country does for national survival. In the case of substituting for imports from Ukraine, the chief beneficiaries would be the very defense enterprises and other heavy equipment manufacturers in Russia which Putin has already declared to be a priority as recipients of rent.

Economically, Russia can afford losing Ukraine. What Russia could not afford is to win Ukraine, that is, to be saddled with not only its current costs of up to $10 billion a year for eastern Ukraine but the much larger amounts that would be needed to support the rest of the country if they were cut off from its western markets.
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Question is who duped whom? EU showed Ukraine the visa free travel, instant membership to EU to become ‘western’ to dupe the Ukranians so they supported the putsch. Actually EU knew that the country has nothing to offer to EU. But EU got the resources of the country and got a market and created outlet of its produces. So they got what they wanted but Ukraine in return got nothing except some lip service. Above article explains how Russia and Ukraine were intertwined as one country economically and how Russia supported Ukraine over the years. Well that is gone now, EU is not behaving as they have expected. But actually this is how west always behaves. Putin once told this as an anecdote: in Russia if someone invites a friend, normally the host pays, but in the west, it is the guest who has to pay from himself. So, when they were invited to association agreement Ukraine thought that west will pay for it. But when they have signed, and finished the meal, now they are seeing the real face of the ‘west’! Please pay, of if you can’t, its your problem! Classic.